BofA Flags Margin Uncertainty for Clorox (CLX) After Q2 Earnings Miss

The Clorox Company (NYSE:CLX) is included among the 15 Best Wide Moat Dividend Stocks to Invest in.

On February 4, BofA analyst Anna Lizzul raised the firm’s price target on The Clorox Company (NYSE:CLX) to $112 from $110 and kept a Neutral rating on the stock. The move followed the company’s fiscal Q2 results, where adjusted EPS came in below the firm’s estimate after gross margins fell short due to higher costs. Looking to the second half of the year, the firm said it continues to hold “more tepid forecasts.” Lizzul pointed to uncertainty around whether consumption trends and margins will meaningfully improve.

Clorox missed market expectations for second-quarter profit on February 3. Shoppers have been trading down to cheaper alternatives as inflation continues to pressure household budgets. This shift has weighed on demand for branded cleaning products. It’s the kind of behavior many people notice firsthand in grocery stores, where private-label products are taking up more shelf space.

Budget-conscious consumers pulled back on purchases of floor cleaners and disinfecting sprays. That pressure showed up clearly in the Household segment, Clorox’s second-largest by revenue. The unit, which includes bags, wraps, and cat litter, reported a 54% drop in adjusted EBIT for the quarter. Higher manufacturing and logistics costs, along with lower net sales, drove the decline.

At the same time, the company has been pushing into new categories. The maker of Pine-Sol recently entered the ready-to-eat market with protein-focused snacks such as Hidden Valley Ranch Dippers & Toppers. Clorox is also moving forward with its $2.25 billion acquisition of GOJO Industries, the maker of Purell, to strengthen its presence in health and hygiene.

On an adjusted basis, Clorox earned $1.39 per share during the quarter, compared with estimates of $1.43, according to LSEG data. Revenue fell 1% year over year to $1.67 billion. Analysts had expected a steeper decline of 2.7% to $1.64 billion.

Management reaffirmed its full-year outlook, projecting a 6% to 10% drop in net sales and adjusted EPS in the range of $5.95 to $6.30. The company said earlier order fulfillment challenges, which hurt consumption and market share, are keeping expectations toward the lower end of that range.

The Clorox Company (NYSE:CLX) operates as a multinational manufacturer and marketer of consumer and professional products. Its business is organized into four segments: Health and Wellness, Household, Lifestyle, and International.

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